1. Field of Invention
This invention relates to a commercial transaction system and method, and more specifically, to a system and method for conducting cash-payment transactions without the use of coins.
2. Related Art
Presently, there are billions of dollars worth of coins, or change, estimated to be lying around and not being used. Spare coins end up in jars or dresser drawers, get lost, or are simply thrown away. The reason change accumulates is that a person must physically carry coins to conduct day-to-day transactions. These transactions include buying goods and/or services from supermarket cashiers, vending machines, parking meters, laundry machines, toll machines, photocopiers, and the like. Although there are several methods in the art which specifically eliminate the use of both paper currency and coins (cash), such as credit cards, debit cards, pre-valued vending cards, and more recently, integrated circuit (IC) cards, none of these methods attempt to eliminate the use of coins with paper currency transactions at the point of sale.
Credit and debit card systems are examples of cashless transactions where a financial institution extends credit or debit to a cardholder to cover purchases from participating merchants. In a credit card system, a financial institution pays the merchant the purchase price less a service charge fee and later bills the cardholder for the purchase price. In contrast, with a debit card system, a financial institution directly deducts the purchase price from the cardholder's bank account. In either case, it is necessary for a financial institution, e.g., a bank, to mediate the transaction. Typically, these transactions need to be attended by a salesperson who calls a processing center via a dial-up modem to obtain authorization, and verifies the cardholder's signature to prevent fraud. This involves significant transaction costs which may be acceptable for large purchases, but is not cost effective for relatively small purchases. In addition, access to financial institutions by telephone lines can lead to security problems, and to an inability to transfer transaction data in the case of a communications link failure. These techniques are also open to human error, and moreover require a large number of steps in collecting and processing the data.
Further examples of cashless transactions involve the use of pre-valued vending cards or integrated circuit (IC) cards. A subway system such as the Washington D.C. Metro system utilizes such pre-valued vending cards. A certain amount of money or cash value is purchased and stored on the card, and subsequently used to purchase goods and services. Each time a purchase is made, the card is debited for the cost of that item. Payment by this pre-valued method, however, entails that the purchaser go to a different specified location to increase the balance on the card with additional money. With IC cards, value must also be loaded at a separate terminal which is typically in communication with one or more financial entities having access to the designated account of the cardholder for authorization of the transfer of value to the IC card. Therefore, a disadvantage of pre-valued vending cards and IC cards is the need to find a separate terminal from which to add value to a card.
Another disadvantage is that conventional pre-valued vending cards can only be used in a closed system, and cannot be utilized by the card user outside the system to freely spend his pre-paid amount. Also, the cards are used until exhausted and then discarded, which contributes to excess environmental waste. In contrast, conventional IC cards have the advantage of being re-valued once their balance is depleted, but like credit and debit cards, added security measures must be taken, and complicated encryption codes must be incorporated into the transaction process to prevent unauthorized or fraudulent access to a cardholder's account. Again, this involves significant transaction costs.
Due to the aforementioned disadvantages of conventional methods for conducting cashless commercial transactions, consumers must still rely heavily on the use of cash, particularly in conducting transactions of relatively small monetary value. As a result, it is necessary to either manually or automatically exchange coins during cash transactions, and this requires that an inventory of coins be kept on hand. Individual cash transactions are burdened by this need to provide and manage coins. It is inconvenient, costly, and time consuming for customers, clerks, and financial institutions alike. The growing popularity of coin-handling and coin-sorting devices is further evidence of the present need to relieve this burden.
Therefore, there is a need for a convenient, cost-effective, open system for eliminating the need to exchange coins with commercial cash transactions at the point of sale. Further, there is a need for a system and method for conducting cash-payment transactions without the use of coins and without requiring a user to access a separate terminal for managing a balance on a storage device.